Provisions involve a high degree of judgment by corporate managers and substantially affect companies’ reported performance, arguably making them prone to earnings management. To analyze the strategic use of provisions under International Accounting Standard (IAS) 37, we examine the notes disclosures of large European companies that provide detailed information about yearly additions and utilized and unutilized reversals of prior provisions. First, our analysis reveals that firms suspected of earnings management tend to withhold disaggregated information on their provisions. Second, by focusing on firms that disclose detailed information, our study suggests that they strategically adjust provision expenses based on their earnings management incentives. Third, considering the use of provisions over time, we find that firms exhibit increased discretionary additions and decreased unused reversals during exceptionally profitable years, suggesting corporate managers engage in “cookie jar” accounting. In contrast, firms show lower discretionary additions and higher unused reversals in periods when they risk missing earnings benchmarks. Our findings suggest the strategic use of provisions and indicate that disaggregated notes disclosures on provisions can provide relevant insights into corporate earnings management strategies.

中文翻译：

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条款的战略性使用：来自欧洲跨国公司的证据


准备金涉及公司经理的高度判断，并严重影响公司报告的业绩，可以说使其容易进行盈余管理。为了分析国际会计准则 （IAS） 第 37 号项下准备金的战略使用，我们研究了欧洲大型公司的附注披露，这些公司提供了有关年度增加以及先前准备金的已使用和未使用冲销的详细信息。首先，我们的分析显示，涉嫌盈余管理的公司往往会隐瞒其准备金的分类信息。其次，通过关注披露详细信息的公司，我们的研究表明，它们会根据其盈余管理激励措施战略性地调整拨备费用。第三，考虑到准备金随时间推移的使用，我们发现，在利润异常丰厚的年份，公司表现出增加的酌情增加和未使用的冲销减少，这表明公司经理进行“饼干罐”会计。相比之下，企业在面临无法达到盈利基准的风险时，可自由支配的增加率较低，未使用的冲销率较高。我们的研究结果表明，准备金的策略性使用，并表明对准备金的分类注释披露可以为公司盈余管理策略提供相关见解。